The Supreme Court Has Blessed International Lost Profits

June 22, 2018 | Insights

This morning, the Supreme Court greatly expanded the available lost profits in cases of international patent infringement. The court delivered its opinion in WesternGeco LLC v. Ion Geophysical Corporation—a case already moderately famous for its first consideration of the Supreme Court’s Halo decision on enhanced patent damages—ruling that lost profits are available when infringing component parts are shipped from the U.S. and then assembled into a product that is sold abroad. Previously, the Federal Circuit Court of Appeals had ruled that only domestic sales could be used to calculate lost profits, even though international sales stemmed from infringing components shipped from the U.S.

Today’s 7-2 opinion, written by Justice Thomas, immediately expands available damages in these situations by several degrees of magnitude. Although the U.S. may have the largest markets for some products, there is little doubt that international markets collectively dwarf those domestically in some industries. For example, according to recent reports, “auto parts, engines and car tires” are some of the U.S.’s top exports at $86 billion. These are all component parts that if assembled and sold abroad, were previous excluded from any lost profits calculation.

Justice Thomas writes that the focus of this decision was “ION’s domestic act of supplying the components that infringed WesterGeco’s patents.” He writes that the “overseas events were merely incidental to infringement”. Thus, the key to obtaining lost profits on foreign sales after this opinion is proof that the domestic component itself is infringing. This may leave open the question as to whether lost profits are available when the combination of exported and non-exported components cause a product to infringe.

Justices Gorsuch and Breyer, an unusual alliance, dissented arguing that “[p]ermitting damages of this sort would effectively allow U.S. patent owners to use American courts to extend their monopolies to foreign markets.” While one may argue this phrasing, that is precisely what today’s court ruling accomplishes, although only in certain situations. The dissenting justices fear that the ruling will “invite other countries to use their own patent laws and courts to assert control our economy.” While this may seem a bit overstated, only time will tell. In any event, available damages in many competitor patent infringement cases, especially in today’s international economy, have now increased.

Click here to view the full opinion in WesternGeco LLC v. Ion Geophysical Corporation.